Real estate appraisal & hotel purchase — That's what buying a hotel is all about

Which factors are often ignored when buying a hotel?

Demand:

What is the demand in the hotel or in the region? Does the region have a high demand for guests, or does it make sense to open a hotel here?

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To do this, you need benchmark figures. You can get such figures, for example, at Fairmas. It is also very important that you analyse the data from the old hotel more closely. Question why the hotel didn't pay off. Why did the regular guests drop out little by little and no new guests arrived? And what are the reasons why you can buy the hotel?

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The data from the PMS tells you more about the hotel. Also our product happyhotel helps you to analyze the PMS data in more detail.

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Balance sheets/ BWAs:

What were the biggest cost blocks and where did the most money go? You can easily see that in a BWA. You can also see the turnover that the hotel has generated here.

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Finally, you should ask yourself why is the hotel being sold? Are there economic reasons for this? Your long-term plan should, of course, be to build the hotel profitably. Therefore, as with a company, you need to set up a financial plan.

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How is the property valuation of a hotel carried out?

How is the purchase price of a hotel or property calculated? In the end, you pay a price for the available square meters. Often, this price can be very different.
In addition, there are other factors that influence the hotel price:

• How many square meters of living space does the hotel have?
• What is the total plot area?
• How many rooms does the hotel have?
• When was the house built?
• Has it possibly been renovated recently?
• Is the hotel currently open?
• Or was the hotel vacant for a long time?
• When, or since when has the hotel been available for sale?
• Where is the hotel located?
• Is there an expert opinion?

Which KPIs are important?

Before you decide to buy the hotel, study the relevant hotel KPIs to be able to make an assessment of the hotel's success. In the hotel industry, there are many different key figures that provide information about success and failure.

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The most important key figures are summarized for you here:
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- RevPAR
- ADR
- Utilization
- CPB
- regular guests

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It is also interesting to note the development of figures from recent years. This very often shows where the problem was and what could lead to failure.

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The hotel purchase is complete, what are you investing in?

Hotels are usually renovated immediately after purchase because previous owners missed out on making new investments. As a result, the hotel has slowly but surely no longer remained competitive. The new owner can often take out another loan for renovation relatively easily.
Digitalization is often capitalized immediately upon restart and people try to work directly with modern systems. This makes it easier for you to get off to a dynamic start and you usually even save money with new, modern systems!

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Why are so many hotels going bankrupt in times of corona?

Hotels that were not doing well before the crisis have been hit hard by the Corona crisis. Many had already been able to pay their staff with difficulty and new loans were needed time and again.
However, this does not have to mean that the hotel operates directly through a new owner. It often takes a lot of time and effort to make a hotel a success.
There are currently a great many hotels that are on the verge of closing. This is particularly interesting for many investors, as they get to hotels cheaply and buy hotels. In addition, there is currently a lot of money on the market that investors want to invest in order to get a return. As a result, there will probably be several new hotel owners in the near future.

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Conclusion

In my opinion, it is important to know what you want to achieve with a hotel purchase and what you will do differently than the previous owner. Only if you can answer these questions can you be successful with the new hotel.